The four-dollar gas and the five-dollar burger weigh on Tanya Byron’s wallet. But it’s the rent that really bites.
“It’s pretty depressing,” says the travel agent from Jacksonville, Florida, sitting in the tiny dining room that doubles as her home office. “I make $42,000 a year and can barely afford a one-bedroom apartment.”
Rising costs for housing, food and other basic necessities are a major driver of inflation, and they’re hitting low-income Americans especially hard, posing a growing challenge to President Biden and top economic policymakers. from the country.
A Labor Department report on Wednesday showed consumer prices in April were 8.3% higher than a year earlier. That’s down slightly from March’s inflation rate of 8.5%, thanks in part to a short-lived drop in gasoline prices last month. Gas prices have since rebounded to a record high, although not adjusted for inflation.
But food and housing costs remained high, according to the latest inflation report. In Jacksonville, apartment rents have jumped 23% over the past year, according to Realtor.com.
“I feel like there should be some sort of cap on the percentage a landlord can raise the rent if they haven’t done anything,” says Byron, whose own apartment dates from another period of soaring prices.
“It was built in 1976, and they haven’t updated anything,” she says. “The doors and baseboards are painted brown. It’s clean, but it’s very basic.”
Worry about the future
Byron had once hoped to move into a condo, but with real estate prices soaring and mortgage rates topping 5.25%, buying a home seems out of reach.
“I’m really worried about the future,” says Byron. “What’s going to happen to people making $15 and $18 an hour, single mothers, and people with mouths to feed?” It scares me very much.
When inflation is high, everyone pays the price, but research suggests that low-income families suffer the most.
“Typically, food, gasoline and shelter make up a larger share of total spending for lower-income households than for higher-income households,” says Dan Sichel, an economist at Wellesley College.
There is another critical factor, adds Sichel.
Low-income people tend to pay higher prices, even for similar items. They may be less able to go to cheaper stores, take advantage of seasonal discounts, or “get the giant pack of toilet paper to put in the basement when it’s on sale.”
Sichel chaired a committee of the National Academies of Science, Engineering, and Medicine that recommended the Department of Labor try to reflect these realities as part of an effort to modernize how the government measures labor. Cost of life.
“What people pay for similar items in different stores is very important for understanding inflation inequalities,” Sichel said.
The committee recommended other ways to improve how the government measures inflation, including more frequent updates to the basket of goods and services used to track prices.
Currently, the basket is only adjusted once every two years. That may miss big swings in consumption habits like those that happened during the coronavirus pandemic, when Americans suddenly bought fewer movie tickets but more streaming subscriptions, for example.
Any effort to update the inflation measure is likely to attract disproportionate attention at a time when the consumer price index is in the headlines.
“I think the stakes are very high right now,” Sichel said.
Biden, whose approval ratings have fallen as prices climb, sees tackling inflation as his top national priority.
“I know families all over America are hurting,” Biden said Tuesday. “I know you must be frustrated. I know. I can feel it.”
The president blamed pandemic-related supply chain groans and the war in Ukraine as the main causes of inflation.
While the administration has tried to offset price increases with oil outflows from the Strategic Petroleum Reserve and other measures, Biden says the Federal Reserve has a primary role to play in bringing inflation down.
The Fed fights inflation
Chris Waller, who sits on the Fed’s board of directors, agrees.
“Inflation is too high and my job is to bring it down,” Waller told the Economic Club of Minnesota on Tuesday. “We have to raise [interest] rates. We need to calm demand and try to reduce inflationary pressures. If we get help from supply chain resolutions, that’s fantastic, but I’m not counting on it.”
The Fed raised interest rates by half a percentage point last week and signaled that two more big rate hikes are likely in June and July.
Waller and his colleagues at the Fed say the economy and labor market are strong enough to withstand a hike in interest rates without a sharp rise in unemployment.
But Waller admits that if layoffs do occur, they risk hurting the same people who are already hardest hit by rising prices.
“We’re trying to lower the inflation tax for everyone, but there’s a small part of society that could bear the brunt of it by losing their jobs,” Waller said. “There’s no magic formula in a textbook that tells you how to do it. You kind of have to take a chance and see where it leads.”
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